GDP Per Capita
GDP Per Capita
The U.S. economy has the largest GDP in the world, by a considerable amount. The United States is also a populous country; in fact, it is the third largest country by population in the world, although well behind China and India. So is the U.S. economy larger than other countries just because the United States has more people than most other countries, or because the U.S. economy is actually larger on a per-person basis? This question can be answered by calculating a country’s GDP per capita; that is, the GDP divided by the population.
\(\begin{array}{rcl}\text{GDP per capita}& \text{=}& \text{GDP/population}\end{array}\)
The second column of this table lists the GDP of the same selection of countries that appeared in the previous lesson on Tracking Real GDP over Time and this table, showing their GDP as converted into U.S. dollars (which is the same as the last column of the previous table). The third column gives the population for each country. The fourth column lists the GDP per capita. GDP per capita is obtained in two steps: First, by dividing column two (GDP, in billions of dollars) by 1000 so it has the same units as column three (Population, in millions). Then dividing the result (GDP in millions of dollars) by column three (Population, in millions).
GDP Per Capita, 2013 (Source: http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx)
| Country | GDP (in billions of U.S. dollars) | Population (in millions) | Per Capita GDP (in U.S. dollars) |
|---|---|---|---|
| Brazil | 2,246.00 | 199.20 | 11,172.50 |
| Canada | 1,826.80 | 35.10 | 52,037.10 |
| China | 9,469.10 | 1,360.80 | 6,958.70 |
| Egypt | 271.40 | 83.70 | 3,242.90 |
| Germany | 3,636.00 | 80.80 | 44,999.50 |
| India | 1,876.80 | 1,243.30 | 1,509.50 |
| Japan | 4,898.50 | 127.3 | 38,467.80 |
| Mexico | 1,260.90 | 118.40 | 10,649.90 |
| South Korea | 1,304.47 | 50.20 | 25,975.10 |
| United Kingdom | 2,523.20 | 64.10 | 39,371.70 |
| United States | 16,768.10 | 316.30 | 53,001.00 |
Notice that the ranking by GDP is different from the ranking by GDP per capita. India has a somewhat larger GDP than Germany, but on a per capita basis, Germany has more than 10 times India’s standard of living. Will China soon have a better standard of living than the U.S.? Read the following Clear It Up feature to find out.
Is China going to surpass the United States in terms of standard of living?
As shown in this table, China has the second largest GDP of the countries: $9.5 trillion compared to the United States’ $16.8 trillion. Perhaps it will surpass the United States, but probably not any time soon. China has a much larger population so that in per capita terms, its GDP is less than one fifth that of the United States ($6,958.70 compared to $53,001). The Chinese people are still quite poor relative to the United States and other developed countries. One caveat: For reasons to be discussed shortly, GDP per capita can give us only a rough idea of the differences in living standards across countries.
The high-income nations of the world—including the United States, Canada, the Western European countries, and Japan—typically have GDP per capita in the range of $20,000 to $50,000. Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have GDP per capita in the range of $6,000 to $12,000. The low-income countries in the world, many of them located in Africa and Asia, often have GDP per capita of less than $2,000 per year.
This lesson is part of:
The Macroeconomic Perspective